WASHINGTON: U.S. President Donald Trump said, the tariffs he imposed on Mexico, Canada, and China might cause “short-term” pain for Americans. These tariffs have sparked concerns in global markets, with fears they could slow down economic growth and push up inflation.
Trump said he would speak with the leaders of Canada and Mexico on Monday. Both countries have announced retaliatory tariffs, but Trump does not expect these talks to change his stance. “I don’t expect anything dramatic,” he said, adding, “They owe us a lot of money, and I’m sure they’re going to pay.”
He also confirmed that tariffs on the European Union would happen but did not give a timeline.
Economists warn that the 25 percent tariffs on Canada and Mexico and 10 percent on China. America's top trading partners could hurt global growth and raise prices in the U.S. However, Trump argues these tariffs are necessary to curb immigration, stop drug trafficking, and boost local industries.
On Monday, financial markets reflected these worries. U.S. stock futures fell over 2 percent, while markets in Asia, including Hong Kong, Tokyo, and Seoul, dropped by a similar margin. The Chinese yuan, Canadian dollar, and Mexican peso all weakened against a strengthening U.S. dollar. Oil prices in the U.S. also rose over USD1, with gasoline futures up 3 percent, as Canada and Mexico are top oil suppliers.
North American industries, from automotive to consumer goods, are bracing for the impact. Analysts from ING noted that nearly half of all U.S. imports would be affected by these tariffs, requiring the U.S. to double its manufacturing output to be an unrealistic expectation in the short term.
“Escalating trade tensions are a lose-lose situation for all involved,” ING analysts wrote. Some experts warned the tariffs could push Canada and Mexico into recession and cause stagflation, i.e, high inflation with slow growth and rising unemployment in the U.S.
Tariffs Set to Begin February 4
The new tariffs are scheduled to take effect at 12 hours at Americana time (ET) on Tuesday, Feb 4). Some analysts believe there is room for negotiation, especially with Canada and China. Goldman Sachs economists said the tariffs might be temporary, but there’s little clarity as the White House hasn't specified conditions for lifting them.
Trump insists the tariffs will stay until the United States addresses what he calls a national emergency over fentanyl, a deadly opioid, and illegal immigration. China plans to challenge the tariffs at the World Trade Organization and has hinted at further countermeasures but is open to talks.
China pushed back strongly on fentanyl, stating, “Fentanyl is America’s problem,” and emphasized its efforts to combat the issue.
Mexican President Claudia Sheinbaum criticized the U.S. for failing to handle its fentanyl crisis, saying tariffs won’t solve the problem. She promised to announce more details on Mexico’s retaliatory tariffs soon.
Canada also plans to challenge the tariffs through international legal channels. Prime Minister Justin Trudeau called on Canadians to boycott U.S. goods after announcing tariffs on USD155 billion worth of American products, from peanut butter and wine to lumber and appliances. Canadian officials are also preparing support measures for businesses affected by the trade war.
Trump has been particularly critical of Canada, even suggesting it should become the 51st U.S. state. He claimed Canada “ceases to exist as a viable country” without U.S. subsidies.
Legal Challenges and Political Backlash
Trump declared a national emergency using two laws (The International Emergency Economic Powers Act & the National Emergencies Act) giving him broad authority to impose sanctions. However, legal experts say he may face lawsuits for pushing the limits of these laws.
Some Democratic lawmakers accused Trump of abusing his executive powers, while others warned that the tariffs would raise prices for consumers. Even some Republicans criticized the move. “It will be paid for by American consumers. Why would you want to fight with your allies over this?” said Republican Senator Mitch McConnell.
A Reuters/Ipsos poll showed Americans are divided on the issue, with 54 percent opposing the tariffs and 43 percent supporting them. Democrats were more likely to oppose, while Republicans largely supported the tariffs.
Investors on Edge
Investors are closely watching for further tariffs on sectors like oil, gas, steel, aluminum, semiconductors, and pharmaceuticals. The European Union has promised to respond strongly if Trump targets EU goods. Volkswagen, Europe’s largest carmaker, is hoping negotiations will prevent a trade war.
Automakers face serious risks, as new tariffs on cars built in Canada and Mexico could disrupt supply chains. Trump set a 10 percent tariff on Canadian energy products after facing pressure from oil refiners and Midwestern states. In 2023, crude oil imports from Canada made up nearly 25 percent of total U.S. imports from the country.
The White House also announced that Canada would lose the duty exemption for shipments under USD800. Officials claimed that Canada and Mexico have become key channels for smuggling fentanyl and its ingredients into the U.S. through small packages often overlooked by customs agents.